The Pakistan Association of Automotive Parts and Accessories Manufacturers (Paapam) has urged the Federal Board of Revenue (FBR) to clear around Rs5 billion worth of sales tax refunds of the tractor industry immediately as non-disbursement of refunds may cause a delay in payments to the vending industry.

In a joint statement, Paapam Chairman Abdul Rehman Aizaz, Senior Vice Chairman Abdur Razzaq Gauhar and Vice-chairman Irfan Qureshi pointed out that the tractor industry was facing severe liquidity crunch, as Millat Tractor’s overdue sales tax refunds were worth about Rs3.5 billion while Rs1.4 billion of Al-Ghazi Tractors had been outstanding for the last one and a half year.

As a result, there is a strong possibility that they may not be able to continue to make regular payments to around 250 vendors, engaged in making parts and accessories for the tractor industry and creating job opportunities. They pointed out that tractor manufacturers and the vending industry were inter-connected and if refund payments were held back, the vendors would also face cash flow trouble.

Sales tax is paid by the vending industry on the supply of parts to tractor manufacturers, who return the tax after getting refunds from the FBR. Currently, the output sales tax is chargeable on the supply of tractors at 5% against 17% paid on purchasing local or imported raw material and components.

They said that the tractor vending industry was operating only on marginal profitability and working hard to supply parts to the tractor industry aimed at increasing agricultural production.

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Besides, clearing the outstanding sales tax refunds of Rs5 billion at the earliest, the revenue board also needed to ensure that SRO 363(1)/2012 was followed, the association office-bearers said.

They cautioned that agricultural mechanisation was the key to food security and if the tractor industry continued to face liquidity crunch, the target of food security could not be achieved. Moreover, the industry players stated that the current food crisis could deepen if tractors were not provided in time to farmers.

“There is a dire need to enhance farm mechanisation to improve per hectare yield, which is not possible without supporting the tractor industry through consistency in policies.”

The association requested the FBR authorities that a speedy and efficient sales tax refund system be established as national food security was no less important than exports.

Published in The Express Tribune, May 4th, 2021.

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